STATE OF NEW YORK
25 BEAVER STREET
NEW YORK, NEW YORK 10004
|David A. Paterson
OGC Op. No. 09-01-10
The Office of General Counsel issued the following opinion on January 16, 2009, representing the position of the New York State Insurance Department.
Re: Flexible Rating for Private Passenger Automobiles Predominantly Used for Business Purposes
1. May an insurer utilize flexible rating for private passenger automobiles predominantly used for business purposes under Insurance Law
2. Is an insurance policy covering a private passenger automobile predominately used for business purposes subject to Insurance Law
1. An insurer may utilize flexible rating under Insurance Law § 2344 for private passenger automobiles predominantly used for business purposes if the automobiles are not used for the transportation of persons for hire.
2. An insurance policy covering a private passenger automobile predominately used for business purposes is subject to Insurance Law
The inquiry is of a general nature, without reference to particular facts.
The inquirer questions whether an insurer may utilize flexible rating1 for “private passenger automobiles” predominantly used for business purposes under Insurance Law
With regard to Insurance Law § 2305, subsection (b) requires the Superintendent’s prior approval for rate filings for certain kinds of insurance, such as motor vehicle assigned risk insurance, motor vehicle insurance required by Vehicle and Traffic Law
Furthermore, a policy is subject to Insurance Law
Moreover, whether automobile insurance is subject to Insurance Law § 3425 depends upon the predominant use of the motor vehicle.6 If the vehicle is predominantly used for business purposes, then the insurance coverage is not subject to Insurance Law
Lastly, an insurance policy is subject to Insurance Law
To summarize, coverage insuring against losses or liabilities arising out of the ownership, operation, or use of a private passenger automobile predominantly used for business purposes is not subject to Insurance Law
For further information, you may contact Senior Attorney Joana Lucashuk at the New York City office.
1 Flexible rating permits periodic rate changes within applicable flexibility bands on a file-and-use basis. § 161.0(c) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 161 (1989) (Regulation 129). Unless the Superintendent specifically exempts markets from flexible rating, an insurer must obtain the Superintendent’s approval to implement rate changes beyond the bands. Id.
2 11 NYCRR 161 (Regulation 129) sets forth accompanying exemptions, standards and procedures.
3 However, as discussed infra, the operative section for vehicles for hire is Insurance Law § 2328.
4 Prior to 1984, Insurance Law § 677(3), which pertained to prior approval of rates in the context of no-fault insurance, applied to policies covering losses or liabilities arising out of the ownership, operation, or use of a motor vehicle predominately used for nonbusiness purposes. The term did not include motorcycles because “motor vehicle,” as used in the now Article 51 of the Insurance Law pertaining to no-fault insurance, excludes motorcycles. During the 1984 recodification of the Insurance Law, which was intended to make only non-substantive changes, the Legislature renumbered Insurance Law § 677(3) as Insurance Law § 2328. Although Insurance Law § 2328 was no longer part of what is now Article 51, the language set forth in Insurance Law § 2328 essentially remained the same, and the statute continued to use the phrase “motor vehicle predominately used for nonbusiness purposes.” Chapter 113 of the Laws of 1995 thereafter created a flexible rating system for policies covering automobiles predominately used for nonbusiness purposes. In doing so, Chapter 113 amended Insurance Law § 2328 by removing the reference to a motor vehicle “predominately used for nonbusiness purposes,” and established Insurance Law § 2350, which references motor vehicles predominately used for nonbusiness purposes. Insurance Law § 2350 sunset in 2001. As a result, in 2003, the Legislature added private passenger automobile insurance to Insurance Law § 2305(b). In 2008, Chapter 136 added a new Insurance Law § 2350 to permit flexible rating for nonbusiness automobile insurance policies, and amended Insurance Law § 2305(b)(13) to require prior approval for private passenger automobile insurance rates, except as provided in new Insurance Law § 2350. Although Insurance Law §§ 2305(b)(13) and 2350 use different terms, it is clear from the legislative history that they have the same meaning.
5 Insurance Law § 2328 modifies the prior approval requirements for vehicles for hire by subjecting to file-and-use rate filings that are no higher than the rates last approved by the Superintendent.
6 For the purposes of Insurance Law § 3425, “motor vehicle” has a broader meaning than under Insurance Law § 2350, and includes motorcycles.